Why does it matter?
Kroger and Ocado began their partnership in 2018 with plans to set up up to 20 automated fulfillment centers nationwide. Eight of them are operational, and two more are expected to be up and running in Phoenix and Charlotte by early 2026. But Kroger has been slow to roll them out, even closing three “speaking” facilities last year. If progress continues to slow, their exclusivity agreement could be terminated – which could open the door for Ocado to partner with other US retailers.
Ocado’s automated fulfillment technology – powerful but capital intensive
Ocado’s fulfillment centers are among the most advanced in the world, using thousands of autonomous robots running on a grid system to pick and move handbags with incredible speed and accuracy. The grid allows for vertical cube storage, which increases density and enables quick retrieval. Orders are collected by robots that move across the top of the network, dropping and lifting bags as needed, before assembling and packing orders for delivery.
Ocado vs AutoStore – similar approach
It’s worth noting that Ocado’s technology bears striking similarities to AutoStore’s widely adopted automated cube-based storage system. AutoStore, which pioneered the concept of grid and robotics, has filed a series of lawsuits against Ocado over alleged patent infringement. The legal dispute spanned several countries and led to a settlement in 2022, allowing both companies to continue operating but focusing on how competitive and closely related these systems are.
Both technologies solve the same basic problem: capturing goods at a high density from person to person in a small space. They rely on fleets of robots to access bags stored inside the cube, dramatically improving space utilization and productivity compared to traditional racking systems. The primary difference lies in the design details and their control software. Otherwise, they are remarkably similar.
The biggest trend: Agility is the new ROI in automation
Kroger’s reassessment highlights a critical lesson for the entire retail and distribution industry: that technology decisions must be flexible enough to meet changing market demands.
“Aligning customer expectations and requirements and deploying the right automation technology is why Systems Integrator exists ISD – Integrated Systems Design “It is OEM agnostic,” he says Romaine. I often tell clients. “Leveraging ISD’s 8-step OptimalOps process before and during implementation is designed to decompose current state versus future state market requirements and flexibility built into any type of deployed technology.”
In other words, automation is not just about speed and efficiency, it is about presence Ready for what’s next. Whether retailers pursue cubic warehousing like Ocado and AutoStore, AMR-based shelf-to-person systems, or store-based micro fulfillment, success depends on aligning these solutions with customer expectations, cost pressures, and long-term growth strategies.
Speed and flexibility are vital characteristics when it comes to implementing warehouse automation. When Kroger says it’s evaluating its use of its 2,700-plus store network in distribution, it’s actually talking about a hub and spoke network rather than a central fulfillment center. “The hub and hub translates into us being closer to customers and much more responsive than a larger regional fulfillment center…flexibility and improved customer service,” Romaine said.
Takeaway for retailers and operators
Kroger’s move is a reminder that automation investments aren’t set and forget. They must be constantly evaluated against ROI, service level expectations, and emerging technologies.
In ISD, we have OptimalOps process It helps customers evaluate current operations, model future-state requirements, and deploy solutions that reduce costs, increase productivity, and provide flexibility for tomorrow’s requirements.
About ISD – Integrated Systems Design
Integrated Systems Design is a comprehensive systems integrator of automation solutions for warehouse, manufacturing, distribution centers, retail, assembly and wholesale applications, improving operations and productivity while reducing operating costs. Whether providing consulting services to address current issues or developing scalable future plans to address industry challenges, ISD creates value by tailoring systems to our customers’ specific requirements.
ISD’s expertise ranges from part handling (part by piece), storage and picking, cases and pallets, construction lines and special or custom handling solutions. Products and services include: automatic storage and retrieval (ASRS), conveyors, AMRs, robots, payment stations, shuttles, pick-to-light, rotators, vertical lift units (VLMs), sortation systems, truck loading/unloading systems, controls, software (including inventory management, WCS, WMS, MES, and ERP).
For more information about this release, please contact: Ed Romaine, VP Marketing & Bus. Dave, 215-512-2613, [email protected]
